1. McCarthy Tétrault APGQ – Conference 2016
Panel 3: How local production meets climate change targets
October 31, 2016
McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca

2. Carbon Pricing Around the World
In 2016, World Bank estimated that almost 40 countries and more than 20 cities, states and provinces currently use carbon pricing mechanisms or are planning to implement them.
These jurisdictions are responsible for almost 25% of global emissions; carbon pricing initiatives cover about half of emissions in these jurisdictions.
Recent developments have signaled a general shift towards cap and trade as the preferred carbon pricing mechanism.
McCarthy Tétrault LLP / mccarthy.ca

3. Carbon Pricing Initiatives Around the World
By comparison – global value of voluntary carbon markets in 2015: approx. US $278 million
Source: World Bank & Ecofys – Carbon Pricing Watch 2016
McCarthy Tétrault LLP / mccarthy.ca

4. Global Carbon Pricing – A Comparison
Source: World Bank & Ecofys – Carbon Pricing Watch 2016
McCarthy Tétrault LLP / mccarthy.ca

5. Quebec: Cap and Trade System
Quebec targets:
20% below 1990 by 2020
37.5% below 1990 by 2030
80%-95% below 1990 by 2050
: ↓ 5.7%
[Source: 2013 Quebec GHG Inventory]
ETS
In force since January 1, 2013
Linked to California since January 1, 2014
Captures fuel distributors since January 1, 2015
Almost 85% of Quebec GHG emissions
McCarthy Tétrault LLP / mccarthy.ca

6. Quebec: Cap and Trade System
Targeted sectors
Oil and natural gas extraction
Pipeline transportation
Natural gas distributors
Fuel distributors
Electric power generation, transmission and distribution
Manufacturing
Cover almost 85% of Quebec GHG emissions
McCarthy Tétrault LLP / mccarthy.ca

7. Quebec: Cap and Trade System
Fuel distribution
Fuel : Automotive gasoline, diesels, propane, natural gas, heating fuel oils
Exceptions: aviation fuel, biomass and hydrocarbons used as raw materials
Who ever is the first in Quebec to:
Sale fuels refined, manufactured, prepared or mixed in Quebec for consumption in Quebec
Sale fuels from outside Quebec for consumption or sale in Quebec
Import fuels into Quebec for consumption or sale in Quebec
Distribute natural gas
McCarthy Tétrault LLP / mccarthy.ca

8. Quebec: Cap and Trade System
Registration obligations
Registration of emitters and participants in CITSS
Emission allowances owned and exchanged only within CITSS
Reporting obligations
Industrial and electricity sector: emits 10,000 metric tons or more of CO2e annually
Fuel distributors: more than 200 litres of fuel distributed annually
Covering obligations
25,000 metric tons or more of CO2e annually for all sectors
Except fuel distributors: 200 litres / year
McCarthy Tétrault LLP / mccarthy.ca

9. Quebec: Cap and Trade System
Compliance periods
January 1, – December 31, 2014; January 1, – December 31, 2017 and January 1, 2018 – December 31, 2020
Covering rules
Submit GHG emission allowances that equal the total reported Deadline: November 1st following end of each compliance period
Options to acquire emission allowances
Free allowances: mitigates impact on competitiveness
Unavailable to certain sectors (ex. oil and natural gas extraction)
Government held auctions
Offset: landfill site captured CH4, destruction of ODS…
Direct sales by mutual agreement: fixed price $40-$50 – all cancelled so far
McCarthy Tétrault LLP / mccarthy.ca

10. Quebec: Cap and Trade System
Results of latest joint auction (Aug. 16, 2016)
Number of qualified bidders: 53
Total 2016 allowances for sale: 86,278,410 (35% sold)
Total 2019 allowances for sale: 10,078,750 (8% sold)
Proportion of allowances purchased by emitters: 91.5%
Sale price (CAD):
Minimum price (CAD): Current vintage (2016): $16.45
Settlement price (CAD): Current vintage (2016): $16.45
Maximum price (CAD): Current vintage (2016): $61.44
McCarthy Tétrault LLP / mccarthy.ca

11. Quebec: Cap and Trade System
Challenges
Complex and expensive registration process requiring an excessive level of details;
Continuous disclosure requirements are perceived as difficult to comply with in an era where companies are vast and perform frequent internal reorganizations;
System creates a commercial disadvantage for smaller industries facing increased energy cost without benefiting from free allowances distributed to large emitters;
McCarthy Tétrault LLP / mccarthy.ca

12. Quebec: Cap and Trade System
Challenges
Until ETS are widely implemented, disadvantage Quebec;
Lack of financial assistance to implement new technologies or measures reducing GHG;
Several ambiguous requirements creating confusion and lack of guidelines;
Unpredictability since the rules applicable post-2020 are still in development.
McCarthy Tétrault LLP / mccarthy.ca

13. Cindy Vaillancourt Direct: 514.397.4177 cvaillancourt@mccarthy.ca
McCarthy Tétrault S.E.N.C.R.L., s.r.l. / mccarthy.ca